Need some help make an MKV video

[kenryuakuma]

Well...Here is what I have got:

A Jacky Chan video that has three audios: English, Cantonese and Mandarin and three subs: French, Chinese and English. But it is in AVI format. Now I would like to make it an MKV which keep all the original audios and SUBS without losing any quality of the video itself. Besides, with MKV, you could make all the subs and audios selectable. The question is how I can do that? Usually an MKV video is about 1G - 1.5G but I would like to make the video smaller by reducing the resolution but without quality loss and the SIZE must be around 300MB - 500MB.

[Baldrick]

Shrink it to a mkv with h264 video using HandBrake. Add all audio tracks and subtitles from the avi to the new mkv using mkvmerge (mkvtoolnix).